Investment events
1) In 2023, the company achieved revenue of 19.064 billion yuan, a year-on-year decrease of 11.76%; net profit to mother was 535 million yuan, a year-on-year decrease of 61.29%; net profit after deducting non-return to mother was 480 million yuan, a year-on-year decrease of 66.60%.
2) In the first quarter of 2024, the company's revenue was 5.121 billion yuan, up 13.58% year on year, and net profit to mother was 30 million yuan, down 80.31% year on year.
Key points of investment
Leading domestic aluminum foil companies have fully benefited from the global wave of electrification. In 2023, the company's aluminum rolling processing business achieved revenue of 17.666 billion yuan, of which aluminum foil products achieved revenue of 15.489 billion yuan, achieving sales volume of 632,600 tons, a year-on-year decrease of 4.30%. The company is one of the leading enterprises in the production and sale of aluminum sheet and foil in China. The concept of green development has become a global consensus. Driven by strategic policies such as “double carbon”, the lithium battery industry has ushered in more definite development opportunities. GGII expects global power battery shipments to reach 1,550 GWh by 2025, and is expected to reach 3,000 GWh by 2030. The corresponding demand for battery aluminum foil is 542,500 tons and 1.05 million tons, respectively. Accelerating the expansion of production capacity in the power battery industry will drive a sharp rise in demand for battery aluminum foil.
High quality and stable customer resources, deep cooperation with downstream battery leaders
From 2021 to 2023, the company ranked first in the country in terms of aluminum foil production, sales volume and market share. Among them, battery foil production, sales volume and market share ranked first in the country. Battery foil customers include major domestic energy storage and power battery manufacturers, including BYD, Ningde Era, LG New Energy, Guoxuan Hi-Tech, etc.; in recent years, the company's customer base has stabilized and continued to expand, and relevant long-term cooperation agreements have been signed with Ningde Era, Honeycomb Energy, LG New Energy, etc. At the same time, it has strengthened business cooperation between the two sides at home and abroad, and further strengthened the company's leading position in the field of new energy battery foil and enhanced the company's competitiveness.
Cooperate with global battery leaders and actively expand overseas
The company is currently one of the first domestic aluminum processing companies. It is also the first domestic aluminum foil company to complete overseas layout. The subsidiary European Light Alloy is located in Italy and focuses on the European packaging foil and battery foil markets. The company is actively expanding overseas. The Ningde Era has production capacity plans of 14 GWh in Germany and 100 GWh in Hungary. The company has an aluminum foil factory in Italy, which is expected to take the lead in supplying 114 GWh of production capacity in Europe, fully benefiting from high growth in overseas markets.
Profit forecasting and valuation
The profit forecast was lowered and the “buy” rating was maintained. The company is a domestic battery aluminum foil leader, closely following the battery leader in overseas deployment. Considering the phased decline in profits brought about by increased competition in the lithium battery aluminum foil industry, we lowered the company's profit forecast for 2024-2025. The company's net profit for 2024-2025 is 5.64 billion yuan and 679 million yuan respectively (15.73 billion yuan and 2,291 billion yuan before the reduction, respectively), and the net profit forecast for 2026 is 831 million yuan, corresponding EPS is 0.63, 0.76, and 0.93 yuan/share. The PE corresponding to the current stock price is 18, 15, and 12 times, respectively. Maintain a “buy” rating.
Risk warning
Competition in the industry intensifies; sales of new energy vehicles fall short of expectations; risk of exchange rate fluctuations.